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October 08, 2011

Economist: Corporate Culture

Corporate culture

The view from the top, and bottom

Bosses think their firms are caring. Their minions disagree

Sep 24th 2011 | NEW YORK | from the print edition

AS WALMART grew into the world’s largest retailer, its staff were subjected to a long list of dos and don’ts covering every aspect of their work. Now the firm has decided that its rules-based culture is too inflexible to cope with the challenges of globalisation and technological change, and is trying to instil a “values-based” culture, in which employees can be trusted to do the right thing because they know what the firm stands for.

“Values” is the latest hot topic in management thinking. PepsiCo has started preaching a creed of “performance with purpose”. Chevron, an oil firm, brands itself as a purveyor of “human energy”, though presumably it does not really want you to travel by rickshaw. Nearly every big firm claims to be building a more caring and ethical culture.

A new study suggests there is less to this than it says on the label. Commissioned by Dov Seidman, boss of LRN, a firm that advises on corporate culture, and author of “How”, a book arguing that the way firms do business matters as much as what they do, and conducted by the Boston Research Group, the “National Governance, Culture and Leadership Assessment” is based on a survey of thousands of American employees, from every rung of the corporate ladder.

It found that 43% of those surveyed described their company’s culture as based on command-and-control, top-down management or leadership by coercion—what Mr Seidman calls “blind obedience”. The largest category, 54%, saw their employer’s culture as top-down, but with skilled leadership, lots of rules and a mix of carrots and sticks, which Mr Seidman calls “informed acquiescence”. Only 3% fell into the category of “self-governance”, in which everyone is guided by a “set of core principles and values that inspire everyone to align around a company’s mission”.

The study found evidence that such differences matter. Nearly half of those in blind-obedience companies said they had observed unethical behaviour in the previous year, compared with around a quarter in the other sorts of firm. Yet only a quarter of those in the blind-obedience firms said they were likely to blow the whistle, compared with over 90% in self-governing firms. Lack of trust may inhibit innovation, too. More than 90% of employees in self-governing firms, and two-thirds in the informed-acquiescence category, agreed that “good ideas are readily adopted by my company”. At blind-obedience firms, fewer than one in five did.

Tragicomically, the study found that bosses often believe their own guff, even if their underlings do not. Bosses are eight times more likely than the average to believe that their organisation is self-governing. (The cheery folk in human resources are also much more optimistic than other employees.) Some 27% of bosses believe their employees are inspired by their firm. Alas, only 4% of employees agree. Likewise, 41% of bosses say their firm rewards performance based on values rather than merely on financial results. Only 14% of employees swallow this.